Ontario – No re-litigation when issues have already been fully arbitrated – #747

In Doria v. Warner Bros. Entertainment Canada inc., 2023 ONCA 321, the Court dismissed the appeal of a decision striking Appellant’s Statement of Claim on the ground that it was an abuse of process because it sought to relitigate issues that had already been fully arbitrated. The Court of Appeal confirmed Justice Koehnen’s decision, even though the Statement of Claim sought damages from third parties to the arbitration. Reviewing the application of section 139 (1) of the Courts of Justice Act, R.S.O. 1990, c. C.43, the Court of Appeal confirmed that this section does not give the broad right to sue jointly liable parties separately. That provision states that where persons are jointly and severally liable in respect of the same cause of action, a judgment or release of one of them does not preclude judgment against any other in the same or a separate proceeding. In this case, the provision did not apply. The Appellant’s claim was fully heard, and the Appellant was compensated through the arbitration process and award. Section 139 does now allow for the re-litigation of issues against third parties because the claimant is not satisfied with the decision, whether the decision arose from arbitration or from a court.

The Arbitration – The Appellant rented out his house to allow for the filming of a television show, during which a floor in the house was damaged. The Appellant triggered the arbitration clause against his contracting party and sought damages of more than $650,000. In the arbitration, the Appellant was awarded $49,668.38, which included compensation both for the repair and displacement during the repair period. The Appellant’s request to set aside the award was dismissed; the Appellant was fully compensated by the amount awarded.

Court proceedings – Dissatisfied with the arbitral award, the Appellant sued the Respondents, Warner Bros. Entertainment Canada Inc., Warner Bros. Television Group, Time Warner Inc. and Bulletproof Location Support. These companies were involved in the filming of the television show, but were not parties to the contract with the Appellant and had not been named as respondents in the arbitration. Appellant’s Statement of Claim concerned the same damages suffered as were alleged in the arbitration. Appellant’s Statement of Claim was struck by Justice Koehnen on the ground that it was an abuse of process because it sought to re-litigate issues that were previously fully arbitrated.

The Appeal – The Appellant raised several arguments, all of which were dismissed by the Court of Appeal. 

First, the Appellant argued that Justice Koehnen had erred in the interpretation of section 139(1) of the Court of Justice Act, R.S.O. 1990, c. C.43, which he argued gave him the right to sue jointly liable parties separately. 

Sections 138 and 139 (1),reads as follows:

“138. As far as possible, multiplicity of legal proceedings shall be avoided.

139. (1) Where two or more persons are jointly liable in respect of the same cause of action, a judgment against or release of one of them does not preclude judgment against any other in the same or a separate proceeding.”

The Court of Appeal dismissed this argument:

“[8] Section 139 does not confer an affirmative or even a “presumptive” right to sue jointly liable parties separately. On its plain wording, it provides that separate suits against jointly liable parties are “not preclude[d]” if a judgment has been obtained against one of them. The fact that actions are “not precluded” by prior judgments against a jointly liable party does not mean that such actions must always be permitted to proceed, regardless of the circumstances. If a judge appropriately determines that the subsequent proceeding constitutes an abuse of process, that subsequent proceeding can be stayed or dismissed.”

The Court confirmed that Justice Koehnen’s finding was made in the circumstances of this case and not as a universal ruling. The Court also confirmed that sections 138 and 139 are to be read together:

“[10] […] The motion judge did not err in making the innocuous and doubtlessly correct observations that s. 138 and s. 139 must be read together and that s. 138’s role in discouraging duplicate litigation is served by preventing abusive separate proceedings from being undertaken.”

Second, the Appellant argued that Justice Koehnen had erred in considering the arbitration binding on non-parties. The Court disagreed and said that Jusice Koehnen’s decision did not rely on the legal effect of the arbitration.

“[11] […] The motion judge’s decision was based on the fact that, after enjoying a full opportunity to assert his claim for damages and after obtaining a final award that was paid in full, Mr. Doria [the Appellant] had no need for the imposition of joint liability against others. Yet he sought to pursue litigation against others for essentially the same damages in the hope of achieving a different and more favorable award. We see no error in the fact that the motion judge found this conduct to be abusive. The fact that the arbitral award was secured privately does not insulate the case from considerations of “judicial economy, consistency, finality and the integrity of the administration of justice”, the principles that inspired the motion judge to arrive at the decision he did.”

The fact that the arbitration and the action did not target the same parties did not preclude Justice Koehnen from finding the Appellant’s action to be re-litigation. The Court confirmed Justice Koehnen’s conclusion that the Appellant was seeking the same damages through a Court proceeding that he had sought in the arbitration.

Third, the Appellant argued that Justice Koehnen’s decision was based on a policy of economy of judicial resources. The Court also dismissed this argument and confirmed that Justice Koehnen’s ruling were clearly based on the nature of the action and on the circumstances of the case and not only on resource-based considerations.

Fourth, the Appellant argued that Justice Koehnen had erred in considering the Appellant’s purpose in bringing his action against Respondents. Again, the Court of Appeal confirmed Justice Koehnen’s finding that the Appellant’s purpose was relevant to the abuse of process analysis. The Court also confirmed that no error was made in considering that the Appellant’s proceedings were taken because he was dissatisfied with the arbitral award; it appears on the face of the claim.

Fifth, the Appellant argued that Justice Koehnen had erred in distinguishing previous authorities. The Court of Appeal confirmed Justice Koehnen’s reasons with respect to  Telus Communications Inc. v. Wellman, 2019 SCC 19:

“[19] […] the motion judge was correct noting that Wellman does not support the proposition that there will always be a right to proceed with separate proceedings whenever one of the claims may have to be resolved by arbitration. Indeed, Wellman does not even engage the discretionary determination of judges that the particular proceedings before them are an abuse of process.

[20] As indicated, the abuse of process doctrine may operate to prevent re-litigation even where the strict requirement of issue estoppel are not met. Moreover, determinations of abuse of process are discretionary, attracting deference on appeal: […]”

All Appellant’s arguments on the merit of Justice Koehnen’s decision were dismissed.

Incidentally, the Appellant also sought a leave to appeal the costs awards. The motion for leave to appeal was dismissed and Justice Koehnen’s decision confirmed.

Contributor’s Notes:

This decision is interesting because it implicitly confirmed that the Court considers arbitration to be an integral part of the dispute resolution system. It considered the award the same way it would have considered a judgment, giving it the same status and importance, in the analysis of sections 138 and 139 of the Court of Justice Act. It  is reminiscent of the Supreme Court of Canada’s decision  in Desputeaux v. Éditions Chouette (1987) inc. 2003 CSC 17, which stated, at para. 66, that arbitration is not an inferior form of justice than that offered by the courts. See also:

“[41] …[A]n arbitrator’s powers normally derive from the arbitration agreement.  In general, arbitration is not part of the state’s judicial system, although the state sometimes assigns powers or functions directly to arbitrators.  Nonetheless, arbitration is still, in a broader sense, a part of the dispute resolution system the legitimacy of which is fully recognized by the legislative authorities”

This principle was confirmed in Telus Communications Inc. v. Wellman, 2019 SCC 19, the decision on which Appellant based one of his arguments:

[48] Throughout the better part of the 20th century, Canadian courts displayed “overt hostility” to arbitration, treating it as a “second-class method of dispute resolution” … Courts guarded their jurisdiction jealously and “did not look with favour upon efforts of the parties to oust it by agreement”… The prevailing view was that only the courts were capable of granting remedies for legal disputes and that, as a result, any agreement by the parties to oust the courts’ jurisdiction was contrary to public policy, regardless of the nature of the substantive legal issues…. This judicial hostility, coupled with a lack of modern legislation supporting arbitration, inhibited the growth of arbitration in Canada….

[50]    During legislative debate on the bill that later became the Arbitration Act, the Attorney General of Ontario stated that one of the “guiding principles” of the Arbitration Act is that “the parties to a valid arbitration agreement should abide by their agreements”… He later emphasized that under the new legislation, “the law and the courts will ensure that the parties stick to their agreement to arbitrate”.